Effect of Trump Intervention: Oil price, back above $30 a barrel on hopes of deal to cut supply

Kuwait’s oil minister, Khaled al-Fadhel, said on Friday he supported Saudi Arabia’s invitation for a meeting between Opec and nonOpec oil producers.

The energy ministry of nonOpec producer Azerbaijan, meanwhile, said the Opec+ meeting was planned for April 6 and would be held as a video conference, Russia’s RIA news agency reported. “There does appear to finally be collective acceptance that the market is in such an extraordinary state of oversupply that co-ordinated action is needed,” said Callum Macpherson, Investec’s head of commodities.

“For now, the possibility of ‘something’ happening could make short sellers more wary and help to limit downward pressure on oil prices, but there may need to be more tangible signs of progress fairly soon if a retest of recent lows is to be avoided before long.” UBS analysts said they were sceptical that producers could credibly commit to large cuts and expected oil prices to come under pressure again.

“Even if a deal was to be reached, we believe the co-ordination required would lead to an only delayed and gradual implementation,” Goldman Sachs analysts said.

Both Riyadh and Moscow will be looking for the participation of other countries, in particular the US, analysts said.

“It is difficult to see the current Opec+ group cutting output by at least 10-million bpd — the scale of the reduction would be just too much for the group to handle,” ING said in a research note.

Saudi could drop production down to about 8.5-million bpd but would likely be reluctant to go below that level because of the desire to maintain associated gas production, while Russia is likely to look for some measure of sanctions relief from Washington, said Helima Croft, global head of commodity strategy at RBC Capital Markets.

Washington will not ask US domestic oil companies for a co-ordinated cut in production and is still awaiting the details of planned cuts in Saudi Arabia and Russia, a senior administration official told Reuters.

The Canadian province of Alberta, home to the world’s third-largest oil reserves, is open to joining any potential global pact to reduce a glut of crude, premier Jason Kenney said on Thursday.

With the coronavirus pandemic worsening, Citi analysts forecast a decline in global oil demand in the second quarter of 18-million to 20-million bpd, which in turn should see refinery runs collapse by over two-million bpd, triggering an unprecedented growth in inventory of about one-billion barrels over two months.

Reuters